WorksheetsBinomial Option Pricing
Total questions: 10
Worksheet time: 20mins
In binomial approach of option pricing model, the value of stock is subtracted from call option obligation value to calculate
current value of portfolio
future value of portfolio
put option value
call option value
Current value of stock in portfolio with current option price $20 is $50, then present value of portfolio would be
70
30
0.3
0.167
Value of stock is $250 and the call option obligation is $100 then the current value of portfolio would be
0.35 Times
350
150
2.5 Times
In binomial approach of option pricing model, the fourth step is to create
equalize the domain of payoff
equalize the ending price
high risky investment
riskless investment
Current value of portfolio is $550 and to cover an obligation of call option is $200 then the value of stock would be
350
750
2.75
None Of above
Second step in binomial approach of option pricing is to define range of values
at expiration
at buying date
at exchange closing time
at exchange opening time
Risk on a stock portfolio which can be reduced by placing it in diversified portfolio is classified as
stock risk
portfolio risk
diversifiable risk
market risk
An increase in value of option leads to low present value of exercise cost only if it has
low volatility
interest rates are high
interest rates are low
high volatility
An amount invested is $4000 and dollar return is $300 then rate of return will be
4300
3700
7.5%
0.75%
In capital asset pricing model, stock with high standard deviation tend to have
low variation
low beta
high beta
high variation
